Question
Allison, Billy and Clayton want to form a Louisiana corporation to sell college football championship apparel. They will name their business ABC, Inc. and initially
Allison, Billy and Clayton want to form a Louisiana corporation to sell college football championship apparel. They will name their business "ABC, Inc." and initially issue 350 shares of stock. Allison will own 150 shares, Billy will own 100 shares, and Clayton will own 100 shares. ABC, Inc. will also be authorized to issue an additional 150 shares. All shares will be without par value. Billy and Clayton will run the day-to-day business, and Allison will be a silent investor with no managerial responsibilities. Allison, Billy and Clayton want the right to maintain their respective ownership percentages in the event ABC, Inc. decides to sell the authorized, but unissued 150 shares. They also want a right of first refusal to purchase each other's shares in the event a shareholder decides to sell his or her shares. Finally, they want to require that any new prospective shareholder be approved by a majority vote of the current shareholders.
1.1 (a) What organizational papers are necessary to form ABC, Inc. as a Louisiana corporation? (b) What minimum information must be included in these papers to validly form ABC, Inc.? (c) What, if any, additional provisions are required to achieve the objectives as stated above?
1.2 (a) Is ABC, Inc. required to issue certificates of stock representing the shares to be issued? Explain. (b) If ABC, Inc. issues certificates of stock, what information is to be shown on each share certificate? (c) If ABC, Inc. does not issue stock certificates, will this change the rights and obligations Allison, Billy or Clayton owe to ABC, Inc.? Explain.
1.3 (a) Does the law require that any of Allison, Billy and Clayton be an officer or director of ABC, Inc.? Explain. (b) What officer positions (if any) must they elect? (c) May Billy hold more than one officer position at one time? Explain. (d) Does the law require that the officers also be directors? Explain. (e) What is the difference between straight voting and cumulative voting for director positions? (f) When will shareholders have cumulative voting rights?
1.4 Assume that Allison, Billy and Clayton want to form a Louisiana limited liability company (LLC) instead of a corporation for their proposed venture. To achieve the objectives stated above, should the LLC be formed as a member-managed LLC or instead as a manager-managed LLC? Explain the difference between these two forms of LLC.
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